State regulators approve Xcel's plan to shut down Becker coal-fired plants

Minnesota utility regulators Thursday approved Xcel Energy's plans to shut down its big coal-fired generators in Becker, Minn., by 2026, a move that will eventually eliminate the state's largest emitter of greenhouse gases.

They also directed Xcel to submit a plan for replacing a big chunk of that lost coal generation at its Sherco plant. But the Public Utilities Commission (PUC) didn't approve Xcel's solution of building a large gas-powered generation plant on the Sherco site, a partial power replacement.

Essentially, the PUC asked Xcel to look more closely at renewable energy alternatives — along with the gas plant — to help compensate for the loss of the Sherco coal plants. Plus, the commission told Xcel to consider more "demand side" management — for example, measures to reduce customer energy use.

"There's a process we need to go through to make sure we are not missing something," PUC Commissioner Dan Lipschultz said at an all-day meeting on Thursday.

A year ago, Xcel proposed closing its two wholly-owned Sherco coal generators — each of which can generate 682 megawatts of electricity — in 2023 and 2026. Built in the 1970s, they are Xcel's two largest power plants in Minnesota.

As a partial replacement, Xcel proposed a new 786-megawatt "combined cycle" gas-fueled plant, which uses gas and steam turbines to produce electricity more efficiently than just gas alone. Natural gas-fired power plants emit about half as much greenhouse gases as those that run on coal.

The PUC Thursday found that based on Xcel's review of its generation requirements — as well as the Minnesota Department of Commerce's assessment — there will be a need for about 750 megawatts of power capacity when the second Sherco coal generator is closed.

Xcel took that finding to mean it's on the right path with a new natural gas plant in Becker.

"Today's [PUC] decision gives a clear path as we advance our filing for a gas combined cycle unit at the [Sherco] site, which we are confident is the best resource for our customers and the reliability of our system," Chris Clark, president of Xcel's Minnesota operations, said in a news release.

Environmental groups, which were against authorizing a new gas-fired plant now, were happy with the PUC decision.

"We think this is really good policy," said J. Drake Hamilton, science policy director for Fresh Energy, a St. Paul renewable energy research and advocacy group.

"It acknowledges state law, which says the commission cannot approve a new fossil fuel plant unless it is in the public interest," she said. And that means the state must evaluate whether renewable energy sources could cost-effectively fill a generation need.

The Minnesota Commerce Department also favored early retirement of the Sherco coal generators, and it concluded that 750 megawatts from a combined cycle power plant would be a "least-cost" resource. Still, the Commerce Department did not specifically recommend a plant at the Sherco site.

"We do think [Xcel] has laid out a good case for a combined cycle plant at that location," Bill Grant, commerce's deputy commissioner, told the PUC Thursday. "But we do think the commission has an obligation to make sure we are looking at least-cost alternatives for ratepayers."

State Rep. Jim Newberger, R-Becker, criticized the commerce department and Gov. Mark Dayton Thursday.

"The decision not to commit to a natural gas unit at the Sherco plant in Becker will mean ongoing uncertainty for the plant's workers and local community for the foreseeable future," Newberger said in a statement.

Rick Hendrickson, a Becker City Council member, agreed. "Had they come out and said 786 megawatts of power at Sherco, that would have put a lot of people's nerves at rest."

Xcel is a major employer and taxpayer in Becker. Sherco's 310 employees would decline to between 150 and 160 after the two coal generators are replaced with the natural gas plant.

John Tuma, a Republican PUC commissioner, said at Thursday's hearing that he voted for the Sherco measure because it's obvious that the best alternative is the gas-fired generator.

"In the end, we will have a Sherco combined cycle plant, built by Xcel," he said. "We all know that's what it's going to be."

Also on Thursday, the PUC essentially voted in favor of Xcel's acquisition of 1,000 megawatts of wind power by 2019. Last month, Xcel announced it would add 1,500 megawatts of wind power in the Upper Midwest by 2020 — much of it in Minnesota. That's enough electricity to power 750,000 homes, at least when the wind is blowing.

The PUC vote "allows us to invest more in wind, giving customers more renewable energy options while continuing to ensure reliable service and support for our communities by advancing the replacement energy generation at our Sherburne County plant," said Xcel's Clark in a statement.

Xcel is the leading U.S. utility in wind power generation.

Mike Hughlett • 612-673-7003